Gone with the Wind? An Empirical Analysis of the Equilibrium Impact of Renewable Energy

Matti Liski; Iivo Vehviläinen

doi:10.1086/709648

Gone with the Wind? An Empirical Analysis of the Equilibrium Impact of Renewable Energy

Department of Economics

Research output: Contribution to journal › Article › Scientific › peer-review

14 Citations (Web of Science)

Abstract

What are the final equilibrium impacts of renewable energy investments on consumer and producer surpluses? This paper offers an approach to quantify the surplus breakdown in a market dominated by renewables and sufficient storage to counterbalance their intermittency-the Nordic electricity market. Wind power entry has strong distributional impacts: 10% market share for wind generation changes the consumer side surplus by an amount that is equivalent to a 40% decline in expenditures, at the cost of incumbents' surplus. The surplus transfer is big enough to cover the cost of subsidizing entry.

Original language	English
Pages (from-to)	873-900
Number of pages	28
Journal	Journal of the Association of Environmental and Resource Economists
Volume	7
Issue number	5
DOIs	https://doi.org/10.1086/709648
Publication status	Published - 1 Sept 2020
MoE publication type	A1 Journal article-refereed

Funding

Matti Liski([email protected]) and Iivo Vehvilainen([email protected]) are in the Economics Department of Aalto University. We thank anonymous reviewers and the editor for thoughtful feedback and careful handling of the paper. We also thank Manuel Bagues, Natalia Fabra, Nils-Henrik M. von der Fehr, Richard Green, Michael Hoel, Felix Hoffler, Markku Kallio, David Newbery, Mathias Reynaert, Robert Ritz, Matti Sarvimaki, Otto Toivanen, Juuso Valimaki, Nikolas Wolfing, and participants at numerous seminars for valuable comments and discussions. James Corbishley and Andrey Zhukov provided research assistance at early stages of this project. Funding from the Aalto Energy Efficiency Program and the Academy of Finland program New Energy is gratefully acknowledged.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 7 Affordable and Clean Energy
SDG 13 Climate Action

Keywords

electricity
renewables
storage
climate policies
PASS-THROUGH
ELECTRICITY
MARKET
COMPETITION
INDUSTRY
COSTS
WHOLESALE
POLLUTION
TAX

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Cite this

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title = "Gone with the Wind? An Empirical Analysis of the Equilibrium Impact of Renewable Energy",

abstract = "What are the final equilibrium impacts of renewable energy investments on consumer and producer surpluses? This paper offers an approach to quantify the surplus breakdown in a market dominated by renewables and sufficient storage to counterbalance their intermittency-the Nordic electricity market. Wind power entry has strong distributional impacts: 10\% market share for wind generation changes the consumer side surplus by an amount that is equivalent to a 40\% decline in expenditures, at the cost of incumbents' surplus. The surplus transfer is big enough to cover the cost of subsidizing entry.",

keywords = "electricity, renewables, storage, climate policies, PASS-THROUGH, ELECTRICITY, MARKET, COMPETITION, INDUSTRY, COSTS, WHOLESALE, POLLUTION, TAX",

author = "Matti Liski and Iivo Vehvil{\"a}inen",

year = "2020",

month = sep,

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doi = "10.1086/709648",

language = "English",

volume = "7",

pages = "873--900",

journal = "Journal of the Association of Environmental and Resource Economists",

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T1 - Gone with the Wind? An Empirical Analysis of the Equilibrium Impact of Renewable Energy

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AU - Vehviläinen, Iivo

PY - 2020/9/1

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N2 - What are the final equilibrium impacts of renewable energy investments on consumer and producer surpluses? This paper offers an approach to quantify the surplus breakdown in a market dominated by renewables and sufficient storage to counterbalance their intermittency-the Nordic electricity market. Wind power entry has strong distributional impacts: 10% market share for wind generation changes the consumer side surplus by an amount that is equivalent to a 40% decline in expenditures, at the cost of incumbents' surplus. The surplus transfer is big enough to cover the cost of subsidizing entry.

AB - What are the final equilibrium impacts of renewable energy investments on consumer and producer surpluses? This paper offers an approach to quantify the surplus breakdown in a market dominated by renewables and sufficient storage to counterbalance their intermittency-the Nordic electricity market. Wind power entry has strong distributional impacts: 10% market share for wind generation changes the consumer side surplus by an amount that is equivalent to a 40% decline in expenditures, at the cost of incumbents' surplus. The surplus transfer is big enough to cover the cost of subsidizing entry.

KW - electricity

KW - renewables

KW - storage

KW - climate policies

KW - PASS-THROUGH

KW - ELECTRICITY

KW - MARKET

KW - COMPETITION

KW - INDUSTRY

KW - COSTS

KW - WHOLESALE

KW - POLLUTION

KW - TAX

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DO - 10.1086/709648

M3 - Article

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VL - 7

SP - 873

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JO - Journal of the Association of Environmental and Resource Economists

JF - Journal of the Association of Environmental and Resource Economists

IS - 5

ER -

Gone with the Wind? An Empirical Analysis of the Equilibrium Impact of Renewable Energy

Abstract

Funding

UN SDGs

Keywords

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